Nobody expects Jim Flaherty to be shuffled out of Finance as his intention is to balance the budget by the next election.

We’re told the Prime Minister had fireside chats with members of his cabinet and from caucus to discuss their future plans. Older ministers who are retiring have been asked to step aside for new blood. Older ministers who have not indicated an intention to retire may have been asked to do the same (Kent). The only exception to this might be Flaherty and Oliver (both are in critically important political files at key junction points — Flaherty and budget balance and Oliver on the KXL decision).

One of my sources on the cabinet shuffle told me to expect a lot of new faces in cabinet.

Shelly Glover has been spotted in Ottawa today. She is a Manitoba MP who many observers speculate will be occupying a chair at Prime Minister Harper’s cabinet table.

The government’s top-line message on this has been one of fiscal restraint. This theme was starting to make rounds online last night and has been echoed by Finance Minister Jim Flaherty in Toronto today.

Shifting security costs were a main concern about the Expo bid. For example, original estimates of Olympic security had been about $175 million and rounded out to about $800 million when all was said and done. Organizers of the Edmonton Expo have projected security costs at $85 million, a figure which the Public Safety minister has dismissed as very conservative for a 90 day event. Actual security costs are projected closer to $1 Billion.

Alberta itself is in deficit and Alberta Finance minister Ted Morton released a provincial fiscal update describing a province in the red, projecting a deficit of $5 billion by year end.

The 2010 Shanghai World Expo had major cost overruns. Originally estimated to be $4 Billion, the cost ballooned to about $80 billion by some reports. Further, there is little evidence that a “world expo” does enough to promote the host country outside of its own borders. Olympic Games, however, are seen to be a major international success by most outside observers.

Don Martin has suggested that the nixing of the Edmonton Expo bid has also scuttled government funding for a Quebec arena. I’ve learned from sources in the PMO that this isn’t necessarily true. The government contends that funding for professional sports facilities remains the responsibility of the private sector. If any funding is to be granted it must be fair and evenly spread across the country. However, the government emphasizes that Canada is in a period of fiscal restraint.

A hallmark of Michael Ignatieff so far as Liberal leader, both actual and interim, has been his penchant to transactional politics; he has so far picked his battles on small and short term policy differences rather that outlining a long-term plan. At the Liberal convention which concluded yesterday in Vancouver, Ignatieff did not spell out his demands, policy outlook or election warnings to the government in his convention speech, he felt that such minor details would be more appropriate for a press conference proceeding the event. Despite his insistence that he will be a transformative visionary leader that is looking forward to shaping Canada over the next eight years through 2017, it is not too credible when Ignatieff’s Canadian hindsight only extends back just five. The latest election threat (but not necessarily an election) is his insistence that the Prime Minister look at EI reform to temporarily extend benefits to workers who have worked 360 hours and to harmonize standards for EI benefits across jurisdictions.

The history of EI in this country has been quite tumultuous for parties that have manipulated it, back to RB Bennett who proposed it, to Trudeau who vastly expanded it to Mulroney and Chretien who subsequently slashed it to Martin who allowed EI surpluses to balloon under his watch. Ironically, it was Chretien in 1995 that changed the standards of EI payments to reflect local unemployment rates breaking down benefits by region. Though all of Canadians pay into EI, the benefits distributed are dependent upon local employment rates. Thus, EI is sort of like equalization but for jobs.

“It seems unfair to Canadians that if you pay into the thing, your eligibility depends on where you live. We think 360 (hours) is roughly where we ought to be.” — Michael Ignatieff

Now Mr. Ignatieff is proposing that we do away with regional differences and temporarily make EI more generous. An election threat from Ignatieff does not ring in the ears of the Prime Minister today after the Liberal leader put the screws to the Liberal senate to pass the Conservative budget just months ago — a budget, which among other things, included a global five-week extension of EI benefits despite region.

What Mr. Ignatieff may instead be attempting is to wrestle an easy “concession” from the Conservative government in order to show that he intends on making Parliament work while boasting that he will decide the timing of its dissolution. EI may indeed be an important policy issue for the Liberal leader to champion as for deregionalizing the program would be beneficial for Ontario, a province that disproportionately pays into it for the benefits received. As Ignatieff is looking to regain Ontario seats lost under the wayward leadership of Stephane Dion, the new Liberal leader may figure that he can shore up his Ontario base and challenge Stephen Harper where the Conservative Prime Minister needs to grow.

Yet today, a spoiler appeared on the scene. Ontario PC leadership candidate Christine Elliott and wife of federal finance minister Jim Flaherty also declared that the EI program was ineffective and unfair for Ontario. Elliott proposed reforming the program to benefit a fairer proportion of out-of-work Ontarians considering the number of the province’s residents pay into it. If EI cannot be reformed, Elliott suggests, Ontario should opt-out of the program. Does this signal a tag-team effort by federal and provincial Conservative forces to deflate Ignatieff’s election threat? Christine Elliott may be serving as a safety valve to deflate Ignatieff by suggesting that a friendly to the Conservative government is advocating a similar position. If a June election is contingent upon EI reform for Ontario, Elliott may be providing the Conservatives cover should they move forward with reform and it would have the added benefit of splitting credit from Ignatieff.

Christine Elliott is the latest to announce her entry into the Ontario PC leadership race following Frank Klees and Randy Hillier.? Elliott announced on Twitter just after midnight earlier this morning and will be doing some press soon to give detail of her plans.

I met Elliott just last weekend as she stopped by Ottawa to measure support for a potential bid.? I asked if she could differentiate herself from the other candidates and she replied, in obvious reference to Tim Hudak, that she’s not a career politician and that she brings “real-world” experience to the race.? Asked for an example of a public policy initiative she would highlight should she lead the opposition in Queen’s Park she replied that the PC Party should emphasize its strength on its mental health strategy for Ontario.? As for education which became the biggest snag for the party led by John Tory during the last election, Elliott conceded that vouchers and charter school would likely be off the table as something the party should champion over the coming years.

Randy Hillier also announced this week and exploded out of the gate with a very professional Hopey-Changey-styled website that emphasized three distinct policies that the former head of the Lanark Landowners Association would strive for in Ontario’s public policy debate.? Abolishment of the Human Rights Commission, Senate elections for Ontario and a “Freedom of Association and Conscience Act” (allowing individuals to opt out of activities in their professions which they find morally objectionable) are the policy initiatives that Hillier will be selling at the doors over the next three (three?!) months.? It is rumoured (though with some suspicion) that Hillier has already sold 2500 memberships.

Frank Klees, perhaps sensing that Hillier was set to announce on Monday, did his best to preempt the announcement by letting his intentions be known on Sunday.? The former Harris cabinet minister and well-liked caucus member disappointed some as he launched without much fanfare or campaign.

Another former Harris cabinet minister is also set to announce though it is unknown as to when.? The perceived (self-styled) front-runner of the race is Tim Hudak, who also has the backing of the former premier.? I attended a breakfast meeting with Hudak a few weeks ago and it’s not much of a scoop to tell you that he is lining up for a serious bid.? Asked then if he’d be announcing soon, he replied that for now he’s only encouraging a dialogue on the future direction of the party.? Of course, he’ll be entering soon, but he’s holding off for strategic reasons.? Like Fred Thompson in the 2008 GOP bid for nomination, an unannounced perceived front-runner can keep his name in the gossip of partisans and media alike by keeping the will-he-or-won’t-he chatter going, though like Thompson, withholding does not necessarily protect a candidate from flopping.? Though his allies in the party executive have engineered a short race in his favour, Hudak will still have to contend among a field of strong candidates.

Conservative staffers in Ottawa are split between Elliott, who is also the wife of federal finance minister Jim Flaherty, and Hillier who carries the true-blue banner of provincial conservatism for many in this town.? Many of the old pros and much of the provincial party establishment are lining up behind Hudak while the new pros are putting their chips on Elliott.

In the dark world of politicking, political gamemanship and attacks on political opponents, the new Liberals are a bit more sophisticated that their purged Dionista bretheren.? With the backdrop of a global economic crisis, governments working together to “rescue” (that’s another debate) the worldwide economy through spending and bailouts, political parties in Canada are somewhat reluctant to play partisan games to avoid being cast in a bad light themselves among the voting public that does not have an appetite for attacks.

For this reason, the Conservatives post-Dion have been relatively quiet on defining the new Leader of the Opposition.? Every opposition leader from Manning to Day to Harper and yes, Mr. Dion, has been ruthlessly defined by the governing party of the time.? We have yet to see the Conservatives unload on Mr. Ignatieff with even a hint of the fire they rained down on the hapless Stephane Dion.

No party can been seen to have initiated a wave of negativity during this time so perhaps the Conservatives have strategically been holding off on firing the first volley.

Though, as I’m coming to realize, the Liberals may have been sniping at the Conservatives for a few weeks now though as insurgents that have shed their Liberal uniforms.

Take, for example, this video by “theGritGirl”:

theGritGirl joined YouTube on March 10, 2009 but is already cranking out broadcast quality vignette’s attacking the Conservative government.? Surely skill doesn’t automatically mean that a big P partisan professionalism is at play here.? But go to 9 seconds into the video to committee testimony by Minister Jim Flaherty.? If you exist off of the Hill, you might have seen this testimony on CPAC and if you exist on the Hill, you may have seen it on that same channel or through the internal House of Commons feed.? Note that this TV-quality feed lacks “CPAC” designation meaning that this video capture likely occurred on the Hill from the House of Commons feed.? This professional video (with titles produced with a professional video suite like After Effects) was also first seen on Warren Kinsella’s blog.? The lack of CPAC designation and Warren Kinsella’s distribution may mean that the Liberals produced the video and are the first to “go neg” during this time of economic crisis.? If the Conservatives are looking for an opening to unleash a barrage against Ignatieff and the Liberals this may be it as their actions would appear to be defensive rather than offensive.

Further to more Liberal attack, we see this entry by Liberal war room chief Kinsella on March 2 featuring a letter from James Turk, the head of the Canadian Association of University Teachers complaining to Minister Goodyear that a staffer told Turk and his colleagues them to “shut up” during a meeting.? After looking into this incident, I learned that Turk and his associates had given the Minister a brow-beating for about an hour without bringing up new business (ie. that he hadn’t already read in published op-eds by Turk et al).? The letter is carbon copied to Marc Garneau (Liberal S&T critic) Stephen Harper, Tony Clement, and Jim Maloway (NDP S&T critic).? The document on Kinsella’s site is a scanned copy of the fax sent to one of those individuals (let’s say Garneau) and then passed onto Kinsella.

In today’s Globe and Mail, we read that Jim Turk has an immediate comment available regarding the balancing of one’s job as Minister of S&T and one’s own personal faith.? Here’s Turk,

“The traditions of science and the reliance on testable and provable knowledge has served us well for several hundred years and have been the basis for most of our advancement. It is inconceivable that a government would have a minister of science that rejects the basis of scientific discovery and traditions,”

Outside of Goodyear’s tangential though unwise hedging on evolution, we see this Globe and Mail piece write up Turk on Goodyear without the context of their previous run-in.? Turk is presented as an unbiased voice on Goodyear.? Also, Turk and Goodyear didn’t spar over Goodyear’s unknown views of a particular field of science or how public policy is or is not informed by those views.? Further, this Globe piece is timed perfectly for those that would gain from a Conservative stumble on Goodyear as the government held a high profile event last night honouring NSERC award winners.? In communications, that was supposed to be the story that Conservatives wanted whereas, the Liberals got quite a gift today.

Finally, if we check out Kinsella today, we find him going along the same attack as that unleashed against Stockwell Day.? Kinsella will be dusting off his Barney doll to chase away religious constituents that Ignatieff is said to be courting.

Have the Conservatives used proxies to level attacks agaist their opponents in the past? Of course.? This is nothing new; every political party does it.? But in this latest post-Dion, post-economic collapse round of the war where everyone is supposed to rise above, if the Conservatives are holding their fire so they won’t be blamed for playing politics during this economic crisis, the Liberals and their proxies have just given them the green light and the media wouldn’t hold much credibility if they said the Tories fired first.

I’ve been hitting the phone, email and blackberry PIN asking known PC organizers, student leaders and strategists who’s been calling them “testing the waters”. I’ve learned that there are at least seven people considering a bid for the Ontario PC leadership to succeed John Tory. Here they are:

Tim Hudak: The perceived front-runner for the PC leadership is backed by a number of student/youth leaders, much of the party executive but has shallow support in caucus. Hudak’s people are pushing for an early leadership election (June) in order to deprive oxygen from other rivals who are trying to catch up. Hudak has been billed as a “true-blue conservative” by many of his supporters.

Christine Elliott: MPP from Whitby-Oshawa, lawyer and wife of Canada’s federal Conservative finance minister, Jim Flaherty. Flaherty ran for the PC leadership against John Tory and the organization and team may fall into place should Elliott contest the leadership.

Frank Klees: Among Hudak and Elliott, Klees rounds out the top three frontrunners who are making active and concerted pitchs to potential supporters to form a team for the 2009 leadership race. Klees ran against Tory for leadership in 2004 and served as a cabinet minister under Premier Harris.

Randy Hillier: Hillier is the former president of the Lanark Landowners Association and has represented a defiant conservative streak during his time in the Ontario legislature. The most conservative among the lot, many see a bid by Hillier as principled yet politically untenable. According to my sources, Hillier has been pushing for a later leadership election.

Peter Shurman: One of the only gains during the last election for the Ontario PC, Shurman is the MPP for Thornhill. A former broadcaster and businessman, Shurman has the profile and resources for a serious bid though my sources say that he is testing the waters carefully at this time. (update: Shurman’s out, but was considering this possibility)

Peter van Loan: Yes, the Conservative federal minister for Public Safety is said to be “leaving the door” open for a potential run at the provincial party leadership. PVL is the former president of the PC Party of Ontario, former government House leader for the Conservative government and, in his previous private sector life, he was a successful lawyer in Toronto. Van Loan is a “no guff” style administrator and would likely bring order to a divisive caucus that churned under Tory.

Dean Del Mastro: Del Mastro is the federal Conservative MP from Peterborough and has served in the House of Commons since 2006. Mr. Del Mastro is also allowing talk to circulate about a potential leadership shot to make a bid for the Premier’s office in the next Ontario election. Del Mastro plays the wouded partisan role well and this may be the contrast to John Tory’s approach that Ontario PC partisans are seeking. Del Mastro has been a visible member of the CPC caucus and has done a good job to raise his media profile in the short time he’s been in Parliament. (update: Del Mastro has ruled out a run at leadership but confirmed that he was approached to run the day of John Tory’s resignation)

On Friday, I sent out an email to the tens of thousands on the Rally for Canada email list asking them to participate in a small survey concerning the upcoming federal budget.? I asked people four questions concerning the government spending and their public policy priorities.? Over three thousand people responded on Friday and over the weekend.? I will be passing on the results to the office of the Minister of Finance as promised.

Q: On the question of Canada’s upcoming federal budget to get us through the economic crisis, which balance within the following options do you think is best for the government to implement? (n=3003)

Q: Which issues are most important to you from a government policy point of view? (n=3051)

Here is the same graph sorted in descending order (n=3051):

Q: What should be done with the Senate? (n=3007)

Q: What should be done with funding for the CBC? (n=2998)

Some notes: “n” is the number of respondents to each question.? Data was gathered from 8am Friday through midnight Sunday night.? Sample data is gathered from a population set that registered on the anti-coalition website RallyforCanada.ca between December 4th 2008 and January 9th 2009.? Answers were not randomly cycled.

That said, this data gives us insight into the priorities of Canadians who are against the concept of a Bloc-supported NDP-Liberal coalition government.? The first question was a careful balance on both sides of the spending vs. taxes debate.? On one hand, the answer set does not include an option to decrease spending and on the other, four out of five answers prompt at least some tax relief.? Most analysts believe that the federal budget will include some tax relief and stimulus in the form of government spending.? The largest group believed a balance spending/tax relief approach would be best while the second largest group favours substantial tax relief and no new spending (given the options presented).

The second question had 24 options.? Each option was a yes/no checkbox to pick public policy priorities.? There was little surprise on the distribution of public policy interests as the generally right-of-centre respondents selected jobs, economy, crime, tax cuts, healthcare choice, and military spending as priorities while passing on foreign aid, culture and arts, and native affairs.? Wheat board reform is generally a conservative priority yet this question is likely too regional for a national survey.

On the specific questions, it is of particular interest that 90% of respondents believe that the Senate in it’s current form must change.? Only 10% of respondents thought that the Senate ought to be left as it is.? On the question of spending for a particular budget item, respondents indicated that funding for the CBC should be decreased (61%) while only 6% thought it should be increased.

4:19pm: Canada will come out of the crisis in a strong position because it went in a strong position.

4:21pm: Will not engineer a surplus just to say we have one.

4:21pm: Budget is balanced for now, but future injection of government stimulus may move Canada into deficit.

4:22pm: Days of chronic structural deficits are behind us.

4:23pm: Tax dollars for political parties and tax credits for donations brought up. Flaherty talking about the $1.75 per vote subsidy. Political parties should pay their own bills without excessive tax dollars.

4:25pm: $1.75 subsidy gone as of April 2009.

4:26pm: Spending growth will follow sustainable track.

4:27pm: Spending review will also look into crown corporations. Government will save $15B over the next five years because of expenditure management system.

4:28pm: re: public sector… New legislation will put in place “annual wage increases for the federal public administration, including senior members of the public service, as well as Members of Parliament, Cabinet Ministers, and Senators, of 2.3 per cent in 2007–08 and 1.5 per cent for the following three years, for groups in the process of bargaining for new agreements.”For groups with collective agreements already covering 2008–09, the 1.5 per cent would apply for the remainder of the three-year period starting at the anniversary date of the collective agreement. In addition, the legislation would suspend the right to strike on wages through 2010–11.” Some honourable socialist members: “oh, oh”.

4:32pm: Largest increase in infrastructure spending. $6B in spending. Aim is to provide new jobs.

4:33pm: Flaherty wants more power to help sustain the banking industry. These powers would include:
– Funding in the unlikely event that there is a draw on the Canadian Lenders Assurance Facility.
– The Canada Deposit Insurance Corporation (CDIC) to establish a bridge bank as a further resolution tool to help preserve banking functions.
– An increase in the borrowing limit of CDIC to $15 billion to reflect the growth of insured deposits since the last increase in 1992.
– The Minister of Finance to provide the CDIC Board of Directors broader scope of action when systemic risk concerns may result from the potential failure of a member institution.
– The power to direct CDIC to undertake resolution measures when necessary to prevent adverse effects on financial stability.
– The provision to CDIC of greater flexibility in the timing of preparatory examinations.
– The Government to inject capital into federal financial institutions to support financial stability, with appropriate provisions to protect taxpayers.

4:37pm: taking action to allow RRIF holders to keep more money in their RRIFs.

4:40pm: increase available credit to the exporting sector. $350 million injection of credit for these businesses.

4:41pm: Inject an additional $350 million of capital to the BDC to help SMEs.

4:44pm: “The greatest histories are written in the toughest times”

4:45pm: Scott Brison to respond for the opposition. Demands a “real action plan”. Brison accuses Conservatives of symbolism over substance. Conservatives have provided gimmicks instead of a game plan. “Nothing for manufacturing, autos”.

4:46pm: Brison: PM wants to change the channel from economy to politics. Canadians are hurting. They want talk on economics rather than politics.

4:48pm: Brison bringing out the personal anecdotes describing real Canadians and real concerns. Liberal are making this statement out to be about that $1.75 vote subsidy cut.

4:50pm: Brison accusing the Conservatives of huge spending and huge cuts at the same time.

4:51pm: Brison: government is selling the house to pay for the groceries.

4:51pm: Brison calls Flaherty “Deficit Daddy”.

4:52pm: NDP will not support economic statement.

4:53pm: CTV reports that the government is digging in their heels on the $1.75 subsidy.

4:55pm: Brison brings up Obama and speaks about his economic team and accuses the Conservatives of schemes.

On November 7th, I argued that we should end government-subsidized campaign welfare in this country and follow the example set by President-elect Barack Obama and amend our electoral system to eliminate our $1.95-per-vote subsidy received by political parties each year. During the US Presidential campaign, Obama did not take a single dollar of public financing and went on to win the election. On a panel for the Public Policy Forum yesterday, I suggested to my Obama-obsessed co-panelist Judy Rebick that Mr. Hope and Change had set the wheels in motion for the elimination of public money for political campaigns.

In my post earlier this month, I suggested that such a system implemented in Canada would cause parties to actually appeal to the electorate and work for donations rather than put their hand out for a per-vote subsidy for being the least offensive option. The theory goes that if our politics inspires (Yes We Can) rather than demonizes (No They Can’t), people will show additional financial support that parties should depend on rather than be the public cash-receptacle of successful fear mongering campaigns that they are. How many Quebeckers these days actually support the Bloc Quebecois on its principles (they’ve all but abandoned sovereignty these days) rather than voting for that party to “block” the Conservatives or the Liberals?

I argued that we should end party welfare to motivate parties to appeal on their own issues.

In the past couple of hours, we’ve learned that in Jim Flaherty’s economic update tomorrow, the Conservative government will move to do just that in the name of showing that even politicians can tighten their own belts.

I may have been a bit of a tongue-in-cheek cynic by using the Obama magic to suggest removing critical funding from two parties of the left. The Bloc Quebecois, as mentioned, has depended on their status as those that could block Liberal corruption in 2006 and the Conservative Party’s… er conservatism in 2008. The Liberal Party on the other hand has depended upon what they are not. Specifically, they have warned Canadians of the Harper hidden agenda and what the Conservatives would do if they had a majority. In this spot and in relative comfort, the Liberals have relied on their per-vote subsidy. Under the new proposed financing cuts, the strength of the Liberal brand won’t matter as it is veritably without substance as conservatism is represented by the CPC and progressive politics is claimed by a resurgent NDP.

CTV reports that under Flaherty’s cuts, the parties could stand to lose up to:

Late this evening, I’ve learned that the per-vote subsidy stands to be reduced in full.

In this, the Conservatives aim to level a strategic blow to the Liberals as Conservative fundraising efforts — rooted in the Reform tradition of passing the hat in legion halls and church basements — has remained strong. Buoyed by detailed supporter databases, the party is set to compete on an advantageous — despite it’s now mutually diminished — footing with other parties. The Liberal Party still has not mastered grassroots fundraising and with an expensive year ahead with another leadership convention, Liberals will need to determine how to appeal (and fast) if they are to survive as a viable organization.

Last night, supporters of the Fraser Institute gathered in the Adam hall of the Chateau Laurier to listen to federal finance minister Jim Flaherty deliver an assessment of the Canadian and global economies. On Thursday, the minister will be delivering a sobering fall economic update in the House of Commons and last night, we got a hint of what might be to come.

Flaherty was introduced by former Ontario PC Premier Mike Harris, the finance minister’s former boss and mentor. Harris disappointed the crowd saying that he was not about to return to politics but that a deep-rooted fixation on Canada’s future prosperity is one that both he and Preston Manning hold. Manning and Harris are the authors of Canada: Strong & Free, a six-volume set of books describing Canada’s ideal path along internationalism, economic freedom, federalism, and education among other topics. Last night’s dinner was held to mark the release of their sixth summary volume called Vision.

In minister Flaherty’s speech, he described Canada’s position in a rapid yet sustained decline of the global economy and while trumpeting Canada’s economic leadership among G7 nations, we are simply the country that is sinking the slowest. Indeed, at a recent meeting of the G20 finance ministers, Mr. Flaherty revealed that not one minister was optimistic about their economies domestic or international. Flaherty will project a surplus through the end of this fiscal year ending April 2009, however, as he conceded the next fiscal year will present “a challenge”. The minister sketched a fiscal portrait in broad strokes declaring that the crisis will not end tomorrow, next week or in the next few months and warned that we have not yet seen the worst of the situation.

Yet despite its faltering position, Canada is an economic leader among its economic peers. Flaherty described the economic measures implemented by the federal government to prepare for such an eventuality saying that they’d never apologize or regret cutting the taxes of Canadians or bringing in more stringent regulatory frameworks to maintain Canada’s economic structure. Indeed, the IMF, as Flaherty noted declared Canada to be the best economic shape going into the global economic downturn.

In the United States, President-elect Barack Obama has conceded that he will delay the rollback of the Bush tax-cuts and in Canada, Flaherty suggests that this Conservative government will maintain Canadian tax-cuts to retain this increased spending power among Canadian consumers.

Perhaps the worst-kept secret in Ottawa is that this government will project a deficit in the near future. Flaherty has declared that he will sing from the same songsheet as other national government and use the federal treasury to stimulate growth, or rather stem the “negative growth”. For this, infrastructure minister John Baird will become a hero of sorts in Ontario as federal dollars are channeled through on road, rail and other contruction projects sustaining jobs. Prime Minister Harper days earlier declared that some deficits provide opportunity and are necessary. Flaherty promised that the stimulus would be underway by March 2009. The pairing of the temporary and artificial sustenance of Canadian jobs via government spending with the consumer spending power of a less-tax-burdened population may help the good ship Canada weather the global economic storm until it subsides. Or at least the theory goes.

Deficit spending will be accomplished in order to sustain the “real” economy. Flaherty promised no ‘structural’ deficit.

For my part I asked the minister during the dinner about conservative opportunity describing this as a time when Conservatives in power could be allowed to make cuts to government spending and suggested that a reduction in the size of government rather than its growth would help balance the books in a real rather than artificial way. The finance minister unfortunately balked at the question suggesting that some areas of growth are necessary such as the rescue of the state of the armed forces. If given a follow-up, I would have suggested that some cuts are necessary too. Even in a recession, the government is a growth industry. The minister described a treasury board review of all programs to measure value for money and promised to extend this review through both core and non-core assets.

As for the public sector, wages will not increase faster than the private sector. This has caused some concern among public sector employees and the minister reached a deal with PSAC, it’s largest union late yesterday. The two parties have settled on a wage increase of 6.8% over the next four years.

On interprovincial trade barriers, the minister promised to break these down and suggested that the current economic climate behooves governments to allow uninhibited trade within Canada. The minister welcomed a cooperative spirit among provincial and territorial ministers on addresses the economic downturn domestically.

The minister declared that the government would not artificially engineer a surplus. Perhaps this is a reflection by the minister on Paul Martin’s method of balancing budgets by slashing transfers to the provinces and “fixing” healthcare for a generation. Ontario has warned Ottawa not to balance its books on the back of the province and what is needed is economic stimulus in the province through reduction of its corporate tax rate. For the part of the Conservative federal government, Flaherty described a $37B debt reduction, a reduction of the tax burden by $200B and a 2012 projected corporate tax rate of 15%.

On securities regulations, the minister promised the creation of a single national securities regulator. The federal government will seek to regulate leverage and large pools of capital. A more transparent market infrastructure is needed according to Mr. Flaherty.

The sum of Flaherty’s speech was to say that this government is acting to sustain economic activity for the foreseeable future as economies around the world reconfigure to recover. Taxes will remain low, spending is temporary and a deficit would be a temporary and an short aberration from Canada’s economic plan.